November 11, 2013

On November 5, the Supreme Court heard oral argument in Medtronic Inc. v. Boston Scientific Corp., U.S., No. 12-1128, in which Medtronic challenges the Federal Circuit’s ruling that a plaintiff in a MedImmune-style declaratory judgment (DJ) action bears the burden of proving non-infringement. In a patent infringement action, the patentee traditionally bears the burden of proving infringement. However, the Federal Circuit ruled in this case that when the declaratory judgment plaintiff is a current licensee of the patent and the defendant does not allege infringement, the burden is on the licensee to prove non-infringement.

At the oral argument, the DJ plaintiff, Medtronic, argued that it should not bear the burden because the burden is substantive and the DJ Act is solely procedural and has no impact on the underlying substantive issue of burdens. Medtronic also argued that inverting the burden would “impair the purpose and utility of the [DJ] Act” by threatening the issue preclusive nature of the Act if a DJ action became subject to a different standard than the corresponding coercive action.

Chief Justice Roberts seemed skeptical of Medtronic’s arguments that MedImmune -type declaratory judgment actions should be treated no differently from any other patent case, asking “why shouldn’t [the licensee] have the burden as [they are the] party who seeks to disturb the status quo?” Medtronic provided its argument that burdens are substantive and the DJ Act is purely procedural. Justice Kagan was concerned that if the burden was not shifted, nothing would prevent a licensee from renegotiating its license agreement by simply filing a DJ action and forcing the patentee to demonstrate that the product infringed the licensed patents. Medtronic answered that the patentee could protect itself from such a possibility by requiring up-front royalties or other contractual protections.

For its part, Boston Scientific argued that the Court should apply the “default rule” by which the plaintiff (Medtronic) must prove it is entitled to relief. Also, because the extant licensed blocked any counterclaim by Boston Scientific for infringement, the suit was really one about “claim coverage.”

Justice Scalia countered that the DJ Act took the case out of the “default rule,” and that “the whole point” of DJ actions is to allow a determination of liability without having to be subject to an actual claim for infringement. Boston Scientific noted that the impossibility of bringing an infringement claim made the suit more of a contract action, so that the burden was properly on the party trying to enforce the contract. Justice Kagan noted, however, that if Medtronic breached the license agreement, Boston Scientific could sue for infringement, so that the DJ action was really to obtain a judicial determination without having to actually be subject to a patent infringement action.

Boston Scientific closed by stating that the normal “default rule” should apply in any DJ action in which only one party is seeking relief, and that party should thus have the burden of proof. Curtis Gannon, Assistant to the Solicitor General, also argued for Medtronic, echoing many of the same arguments made by Medtronic.